Utilisation of palm oil revenue-sharing scheme: Social protection becomes a vital option

This article has been translated by PwC Indonesia as part of our Plantation News Highlights service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.

Bisnis Indonesia - Pemanfaatan DBH sawit: Perlindungan sosial jadi opsi vital

9 October 2023

By: Arif Gunawan and Oktaviano Donald

The distribution of revenue-sharing funds (DBH) of oil palm plantations should be a breath of fresh air for workers and farmers in this commodity processing sector. This is because one of the options the budget utilisation is to expand social security protection for palm oil workers and farmers. 

This provision is contained in Minister of Finance Regulation (PMK) No. 91/2023 concerning Management of Revenue-Sharing Funds of Oil Palm Plantations. The regulation, particularly Article 16 paragraph 1, states that there are two options for allocating palm oil DBH, namely the construction and maintenance of road infrastructure and/or other activities determined by the minister. 

Other activities as referred to in the second option are also detailed in paragraph 5 with 5 more specific options. One of them is social protection for oil palm plantation workers who are not yet registered as participants in the social security programme according to laws and regulations. 

The allocation of oil palm DBH is further explained in paragraph 12, which states that the implementation of social protection for oil palm plantation workers is determined in regional head regulation at least by considering the criteria for aid recipients, the amount of aid, the period for providing aid, and the conditions for providing aid. 

This option should be of concern to local governments. The reason is that there are still many oil palm plantation workers and farmers who do not receive social protection, especially from BPJS Ketenagakerjaan. In fact, the risks involved in the work undertaken by oil palm workers and farmers are quite high. 

In addition, the number of oil palm workers and farmers in Indonesia is significant and is spread across the production centres of this commodity. 

Data from the 2020-2022 National Leading Plantation Statistics released by the Agriculture Ministry’s Directorate General of Plantations shows that the number of workers in smallholder plantations, large state plantations, and large private plantations in the country in 2022 was estimated at 4.5 million people. In the same period, the number of oil palm farmers in the country reached 2.65 million people. 

Sumatra is the island with the highest number of oil palm farmers in the country, while Kalimantan has the largest number of oil palm workers. 

Riau is the province with the largest number of oil palm farmers, while Central Kalimantan was recorded as having the most oil palm workers. 

Unfortunately, not all farmers and workers in the palm oil industry receive social protection from the state. 

This was stated by BPJS Ketenagakerjaan Membership Director Zainuddin during a virtual dissemination of employment social security protection by using palm oil DBH on Friday (6/10). "This year, our focus is on oil palm farmers. The target is 5.8 million oil palm farmers who are not yet protected by BPJS Ketenagakerjaan," he said, as reported on the official website of the Riau Provincial Government. 

The realisation of palm oil DBH distribution also opens opportunities for regions to support oil palm workers and farmers in getting social protection. Moreover, 350 regions received palm oil DBH with a total budget of Rp3.4 trillion this year. 

Based on the attachment in PMK No. 91/2023, Riau Province recorded palm oil DBH of Rp83.13 billion. Riau becomes the province with the largest palm oil DBH allocation in 2023. 

Meanwhile, Ketapang Regency in West Kalimantan received Rp48.3 billion or the largest for a city/regency in the country.

The role of the regional government 

Distribution of palm oil DBH with social protection as one of the utilisation options is also a form of the government's commitment to improving the welfare of commodity farmers and workers. 

However, the realisation of social protection for the palm oil community will depend heavily on regional governments and various stakeholders in this commodity sector. 

Zainuddin explained that BPJS Ketenagakerjaan is trying to reach more oil palm farmers through outreach and coordination with related parties. Utilisation of palm oil DBH, he explained, would be easy to realise if there was coordination and joint commitment to register every oil palm farmer. 

Therefore, he hopes that the regional governments will strive to prepare the regional head regulations. 

"So, if the money and data are already available, commitment from all of us is also important to realise it. Later, there must be a regulation from the regional heads. These oil palm farmers must be protected because they face high risks when working," he concluded. 

Meanwhile, the Riau Provincial Government supports the plan to use palm oil DBH for the social security protection of oil palm farmers. Assistant I to the Regional Secretary of Riau Province Masrul Kasmy said this was in line with the direction of PMK 91/2023. 

He explained that the regulation states that regions need to arrange for workers in the oil palm plantation sector to obtain insurance support and premium payments for labour social protection. 

For this reason, he explained, the Riau Provincial Government will hold further discussions with the relevant regional apparatus organisations (OPD) to prepare the regional regulation that will enable the provision of BPJS Ketenagakerjaan membership for oil palm farmers. 

"This will involve OPD that have knowledge of the number of workers in the oil palm plantation sector," he said on Friday (6/10). 

Masrul also hopes that the regional regulation will provide better social protection for oil palm farmers in Riau Province and help improve their welfare. 

Based on data from the Riau Provincial Government, currently around 3.3 million people in Riau depend on the palm oil industry for their livelihoods. This number reaches 49% of the total population of Riau Province. 

In other words, the Riau Provincial Government, as well as all other regional governments, should consider social protection as an option for utilising palm oil DBH for regional welfare.